Buyers are eyeing UAL

Outside equity players likely to enter picture

Gerald Greenwald and Gordon Bethune are among those interested in taking a stake in United.

Rumblings of a takeover bid for United Airlines grew louder amid the first big public rift between management of the troubled carrier and a group representing its largest unsecured creditors, according to a story in this week's Crain's Chicago Business.

In a terse, two-sentence Bankruptcy Court filing late last week, United's creditors committee clearly indicated that there are outside investors interested in taking a run at the Elk Grove Township-based carrier.

Separately, a top official with a key United union confirmed late Friday that two investor groups had notified him in recent weeks that they are preparing competing reorganization plans for the airline.

And a source close to the creditors committee says "there are very, very qualified people out there waiting for an opportunity" to bid on the company.

Industry sources and people close to United say Dallas-based investment firm Texas Pacific Group and investor consortiums led by former United CEO Gerald Greenwald and ex-Continental Airlines chief Gordon Bethune are among those circling the carrier.

A spokesman for Texas Pacific Group declines comment; the other parties could not be reached for comment Friday. A United spokeswoman says, "We're not aware of any competing plans being put forward."

Until now, neither United nor its creditors has acknowledged active interest by outside buyers. That changed last week when creditors responded to United management's latest request to extend its exclusive right to file a reorganization plan. Exclusivity has insulated CEO Glenn Tilton's team from outside bidders, who might bring in new management.

While creditors did not object to an extension through Sept. 1, they pointedly made an issue out of United management's routine assertion that further delay won't harm creditors because no other parties have expressed interest in submitting a reorganization plan.

"The committee does not acquiesce in or endorse any implication in the debtor's motion that there are not qualified parties interested in submitting alternate plans of reorganization," the committee says in its filing.

Meanwhile, a top union official confirms that outside investors' interest is intensifying. "I'm aware of two (outside groups), but there might be more," says R. Thomas Buffenbarger, international president of the International Assn. of Machinists, United's largest union and a member of its creditors committee. He declines to say which investors have contacted the union.

'THREAT AND MESSAGE'

With the filing, the creditors committee -- which must back any reorganization plan -- sends a strong message to the court and potential bidders that it doesn't consider Mr. Tilton to be the only party plotting a strategy capable of pulling the world's second-largest airline out of bankruptcy, observers say.

"It's both a threat and a message," says turnaround expert William Brandt, CEO of Chicago's Development Specialists Inc.

With an end in sight to United's bankruptcy sojourn, it is attracting interest from investors keen on controlling United and its rich assets. Despite the daunting economics of its industry, investors believe they can better position United for the long haul than Mr. Tilton.

Mr. Tilton is bent on exiting bankruptcy solely through debt financing, a strategy some say will leave the carrier dangerously leveraged and with inadequate capital to keep pace with competitors.

Some question Mr. Tilton's ability to chart a profitable flight plan for United, despite successfully winning cost concessions from the airline's unions. An outside group, including a proven airline executive like Mr. Bethune, who revived Continental, might convince creditors it has a better strategy for United.